Solar City Report: How Los Angeles can Gain the Economic and Environmental Competitive Edge

I. Executive SummaryGlobal Green USA (“GGUSA”) has proposed that the City of Los Angeles and the Los Angeles Department of Water and Power (“LADWP”) commit to “carving out” at least 1% [approximately 80 megawatts (“MW”)] of LADWP’s total electricity generation capacity by 2017 for generation capacity from solar photovoltaic (“PV”) technology. This target falls within the City’s recently-enacted Renewable Portfolio Standard, which calls for increasing renewable power to 20% of the city’s energy mix by 2017.1 GGUSA has proposed that the City and LADWP install the 80MW of PV capacity on City-owned and City-influenced properties.

The per-watt price of PV is generally higher than the per-watt cost of electricity generated using LADWP’s mix of other power resources (e.g., coal, natural gas, nuclear, and hydro), although it may be competitive with the price of electricity from power plants dedicated to meeting peak demand.

An initial analysis of the GGUSA PV proposal suggests the possibility of several benefits to LA:

Financial and strategic value. Adding PV to the mix of resources may offset cost volatility connected with prices for inputs like coal and gas, while reducing exposure to future regulation on greenhouse gas emissions. With regard to homeland security, a PV program can support and visually promote energy independence, while reducing the potential of terrorism-based disruptions. It can also bolster the public perception of LADWP.

Air quality improvements. Because energy production using PV is emission-free, installing PV represents a pathfor increasing generation capacity without exacerbating air pollution concerns in the LA basin. Indeed, 80MWof PV (alongside limited and targeted energy efficiency initiatives) could potentially offset the need to employa heavily-polluting 50MW peaking plant currently in place at the Valley Generating Station.

Economic development. PV is a relatively young technology – and a product of a rapidly-growing industry• that involves 2-3 times the labor intensity per watt as the current mix of LADWP resources. A program of thescale proposed by GGUSA can drive local, potentially union-scale job creation. It can also create opportunitiesfor LA to establish competitive advantage as a new “Solar Silicon Valley” that serves not only as a hub forPV innovation, but also for the development and implementation of complementary technologies, such ashydrogen fuel-cells and zero-emission vehicles.

Predictability of policy. Clear objectives and a consensus commitment to a multiyear plan will provide theplanning certainty needed by business decision makers – both customers and suppliers – to make significantinvestments in PV facilities and activities in LA.

An open and competitive marketplace. Ensuring a level “playing field” for suppliers will inspire new entrantsto participate in LA, foster competitive pricing, and spur technological innovation.

Active efforts to seed demand. Incentives for purchasing solar will efficiently spark the formation of a functioning local industry that markets and sells PV initially (versus policies that attempt to pick and choose suppliers within and across the value chain). A large and growing market will likely lead to local production and R&D, perhaps as paralleled by the rise of Silicon Valley partly in response to large technology purchases by the State of California.

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